Picture this scenario: you’ve toiled for years with cases that “just pay the bills”, but you’ve finally got the perfect case. This ideal case has everything: great liability, massive damages and unlimited insurance coverage. The Life Care Plan projects future medical care that will cost $20 million and loss of earnings adds $3 million to the damages and that’s before you even get to the enormous non-economic damages. This is the case you’ve always been waiting for your whole career. Everything’s perfect, right?
But there’s a problem. The defense attorneys aren’t quite playing along. Instead of acknowledging the problems with the defense case and making a settlement offer that reflects the value of the damages, the defense lawyers play games (hell, this is what they’re paid to do). One week before trial, you get a low-ball offer that is not even in the ballpark of what you consider a reasonable offer. Making things worse, the defense lawyers present you with a final “take it or leave it” low-ball offer just before trial.
Doubts race through your mind. Perhaps you didn’t evaluate the liability or damages correctly? A case that always seemed rock solid now begins to raise doubts in your mind about its true value or perhaps the phantom defense theories raised by the defense lawyers now seem real to you. You think that maybe you should fold up the tent and go home with the best settlement offer you can get.
You are faced with a dilemma. You want to go to trial, but the settlement offer is just enough to tempt you to settle. What do you do?
There is an answer. It’s real simple and it works.
The Absolute Worst Thing You Can Do
The number one mistake that an injury lawyer makes in settlement negotiations is to enter negotiations with the mindset of “let’s see how we can do”. This lawyer has no negotiation strategy, but rather, simply hopes for the best settlement offer he can get.
The “let’s see how we can do” approach is really no strategy at all. It’s a willy-nilly dreamer’s approach that removes all strategy from the art of negotiating the best settlement. And yes, on occasion, it gets the result that you want, but that usually means you just had some blind luck.
While it seems inconceivable that the “let’s see how we can do” negotiation strategy would result in a great settlement, on occasion it does. But does this mean that this strategy (it’s really not a strategy at all) will work for you in the long run? Au contraire, my friend.
This is a recipe for disaster.
You will never have control over the negotiation as long as you continue using the non-strategy of “let see how we can do”. So, if you’re with me, let’s get started with a solution.
The First Thing You Should do Before Settlement Negotiations
Okay, so you know that the “let’s see how we can do” is an amateur’s way of negotiating a settlement (don’t kick yourself if you’ve used this approach before, we all have). But what can you do to get the best settlement possible?
Here’s where you start: you need TWO NUMBERS. You will need to determine the numbers for “settlement value” and “the goal”.
The first number is the settlement value. No, this is not the full value of the damages that you could get from a jury (stop dreaming already!). Rather, the settlement value is a number that takes into consideration the problems in your case.
Let’s say you’ve got a case where liability is weak and there is a strong possibility of a defense verdict. You estimate the possibility of a plaintiff’s verdict as one out of three, or 33.3%. But the strength of your case is damages. You estimate the full value of the economic and non-economic damages at $1 million.
By taking into consideration the liability problems, you arrive at a settlement value that is one-third of the full value of your damages, or in this case, $333,333. This is a realistic number that takes into consideration the problems with liability and damages. Now, you’ve got the settlement value for your case.
The “settlement value” is the number that sets the absolute floor, a/k/a “bottom line”, for the settlement negotiations. Under no circumstances will you accept a penny less than the settlement value during the negotiations. Even if the defense lawyers offer $325,000, you will reject the offer.
Okay, but we’re just getting started. If all that you had to do was to determine the “settlement value”, you will not get the great settlements that all plaintiffs’ lawyers are working night and day for. So, let’s move now to “the goal”.
How to Establish the GOAL For Your Settlement Negotiations
You need to determine a number for “the goal” of your settlement negotiations. The “goal” is the desired outcome of your negotiation, i.e., the best possible outcome that is realistic. I underlined “realistic” for a reason—we’re still not talking about the full value of your damages (that number is called the “verdict potential”, or the potential value of the damages if a jury finds for the plaintiff and awards full damages).
The goal for your settlement negotiations is always higher than the “settlement value”. But it has to be a realistic number for a settlement. The number for “the goal” is typically 25%-30% higher than the settlement value.
Let’s say you establish that your case has a settlement value of $333,000 (a/k/a the “bottom line”), a realistic number for “the goal” could be $450,000. Now, you know that you might do better than $450,000 with a jury verdict, but realistically, this is the best number that is possible for a settlement.
Be real with yourself. Of course, I know you could hit big with a seven-figure jury verdict (the potential verdict value), but that’s not what we’re talking about.
Just because you set the settlement value and the goal at certain numbers doesn’t mean your case won’t settle for more. I often settle cases for more than the goal. You are not limiting the potential settlement by setting realistic numbers for the settlement value and the goal.
How You Can Guarantee That You Don’t Settle For Less Than the Settlement Value
Once you have the numbers for the “settlement value” and “the goal”, you are ready to have a face-to-face meeting with your client. This is the “get real” meeting. At this meeting, you sit down with your client to explain how you arrived at the figures from the settlement value and the goal, i.e., you explain the weaknesses and strengths of the case.
If you’ve developed a good rapport with your client before this meeting, your client will usually nod his head in agreement and accept your settlement value and the goal. Once your client has agreed with the numbers, you must get your client to “sign-on” to your numbers. Your conversation with the client goes something like this:
I will never ask you to accept less than the settlement value. You have my word on that. But I want you to give me your word that you will never agree to consider a settlement offer that is less than the settlement value.
You need to get your client’s solemn vow that he will never accept less than the settlement value even if the final settlement offer is a dollar less than the settlement value. If you leave open the possibility of accepting less than the settlement value, the numbers for your settlement value and the goal are meaningless.
What is the point of setting a settlement value and goal if you don’t make a mutual commitment (you and your client) to hold firm with the numbers?
But be Ready For Temptation (I promise this will happen)
Inevitably, the defense lawyers will make low-ball settlement offers to try to tempt your client. I call this “bait”, i.e., just enough money that your client will be tempted to settle without insulting him. Most injury victims have no money and even a little money may seem like a lottery award to them.
But your client isn’t the dumb fish that swallows the bait…because he’s got you telling him what to do. When the low-ball settlement offer is made, your client will already be educated on what to do and ready to respond. Your conversation will go something like this:
We knew the defense lawyer was going to throw a low-ball offer at you to try to settle the case. But the settlement offer was lower than your settlement value, and you gave me your word that you would not accept a penny less than the settlement value. You and I worked hard to establish a settlement value and a goal for the settlement negotiations, and we are going to hold firm to our numbers. So I will reject the settlement offer. Agreed?
During this conversation, your client will reaffirm his commitment to the settlement value and the goal. But your client has to be prepared for this conversation with reinforcement that the settlement value and goal are mutually binding agreements that you will always hold firm to.
But what if your client balks and wants to accept the low-ball settlement offer? You gently remind him: “Do you remember when we met to set the settlement value and the goal for your case? (of course he does!). During our chat, you agreed that you would not settle for less than $333,000. Are you going back on your word with me?”
Your client will ultimately agree that you are right and stick with the game plan that was agreed upon with the client.
Your Life Just got a Whole Lot Easier
It’s great to have a plan. Once you set a settlement value and a goal for the settlement negotiations, your life just got a whole lot easier. Your authority to settle the case is limited by the numbers agreed upon with your client.
When it comes time for the pre-trial settlement conference, you will have a negotiation strategy that is designed to get the top settlement possible (“the goal”) and you will have a bottom-line number (the “settlement value”). You know that you cannot settle for less than the settlement value for two reasons: #1: you do not have authority from the client to settle for less than the settlement value; and #2: you gave your word to your client that you will never recommend a settlement that is less than the settlement value.
The pretrial settlement conference just became easy. Either the defense lawyers meet your numbers or they don’t. And it’s perfectly fine if the settlement offer is less than the settlement value.
If the defense lawyers want to dictate the terms of a settlement, just tell them to go away. If the defense won’t be reasonable with their settlement offer, you should hold them to the fire for it. Remember, trial law is what you do and your client hired a “trial lawyer”.